Martin M. Looney

Looney Testifies in Support of His PILOT Reimbursement Proposal

Bill will increase funding for cities and towns

Today, the Finance, Revenue, and Bonding Committee held a public hearing on bill introduced by Senate President Pro Tempore Martin M. Looney (D-New Haven), SB 873 AN ACT MITIGATING ADVERSE TAX CONSEQUENCES RESULTING FROM EMPLOYEES WORKING REMOTELY DURING COVID-19, AND CONCERNING THE REMOVAL OF LIENS ON THE PROPERTY OF PUBLIC ASSISTANCE BENEFICIARIES AND A THREE-TIERED GRANTS IN LIEU OF TAXES PROGRAM.

The bill will create a new three-tiered PILOT payment system to increase reimbursement for cities and towns for lost revenue due to the exemption of non-profit and government property from local taxable grand lists.

Below is the testimony from Senator Looney:

Senator Fonfara, Representative Scanlon, Senator Martin, Representative Cheeseman and members of the Finance Revenue and Bonding Committee:

I am submitting this testimony in support of S.B. 873, specifically in support of the provisions that create a three-tiered PILOT payment system.

As many of you know, Connecticut attempts to reimburse our cities and towns for lost revenue due to the exemption of non-profit and government property from our taxable grand lists. Specifically, we reimburse our municipalities for Colleges, Hospitals and state property located within these municipalities. They are not reimbursed for the full amount of the revenue loss, but by a formula set in statute which authorizes 100% reimbursement for prison property, 77% reimbursement for colleges and hospitals and 45% for all other state-owned property.

Unfortunately, our financial commitment to this program has not kept up with the need. While in 2000 we funded 100% of what towns were owed under the PILOT formula, this amount has been in steady decline ever since. In fact, if PILOT is funded at the same level in FY 22 as it is in FY 21, our state support will have plummeted to only 24% of what cities and towns are owed, approximately the level provided when the program was first created in the late 1970s. According to data from the Office of Fiscal Analysis (OFA), in FY 21 our state budget provided $158 million in funding for PILOT. According to the most recent data for FY 22, $613 million is needed to fully fund the PILOT program.

This situation has created a funding crisis for some of our cities and towns. While many municipalities are affected, none are more significantly impacted than Hartford and New Haven. These communities have over 50% of their property that has been designated tax exempt. The underfunding of our PILOT commitment to these two cities creates a staggering hardship.

New Haven receives only $41 million of the $180 million it would be entitled to under the PILOT formula if it were fully funded. Harford receives only $30 million of the $104 million it would be entitled to under the PILOT formula if it were fully funded. This loss of revenue has a direct relationship to the mill rates needed to operate these cities. I have attached a map that indicates what the unfunded portion of PILOT represents in terms of mills for each city and town. For example, In New Haven, this underfunding represents the equivalent of over 21 mills. In Harford it represents almost 18 ½ mills. However, these two cities are not the only ones impacted. New London is underfunded by the equivalent of 6 mills, almost 8 mills in Windham and over 5 mills in New Britain.

This underfunding raises the mill rate in these municipalities, making them more expensive in which to locate businesses and placing an excessive burden on taxpayers least likely to be able to afford it. Simply, this underfunding makes a regressive tax more regressive still.

The proposal in this bill is straightforward. Because it will probably not be realistic to fully fund PILOT at this time, this language prioritizes funding to the struggling communities, large and small, whose grand lists are the least robust.

S.B. 873 creates a three-tiered system that reimburses towns in the following way:

• Towns with an equalized net grand list per capita of less than $100,000 will receive 50% of what they are entitled to under the existing PILOT formula
• Towns with an equalized net grand list per capita of between $100,000 and $200,000 will receive 40% of what they are entitled to under the existing PILOT formula
• Towns with an equalized net grand list per capita of more than $200,000 will receive 30% of what they are entitled to under the existing PILOT formula
• OFA has estimated that PILOT funding will need to be increased by $129 million in order to fully implement this system. Given that PILOT is currently only funded at 24%, all communities that receive PILOT will see their PILOT payments increase under this proposal.

It is time we make a more significant commitment to fund PILOT. Given limited resources, this plan concentrates that investment into the communities that can least afford a reduction in revenue and a state mandated shrunken tax base.

I need to point out that the draft of this bill inadvertently deleted the existing language dealing with what we refer to as our supplemental PILOT payments. This program is part of the overall Municipal Revenue Sharing program that has not yet been fully implemented. I would request that any subsequent draft of this language restore that portion of the statute.

Finally, I would like to express my support for the language in this bill that eliminates liens on property up to $250,000 for individuals who have previously received some form of assistance from the State of Connecticut. The purpose of our public assistance programs is to lift people up and help them carve a path for their financial future. The existing state policies seem to punish those that successfully work their way out of poverty by clawing back the progress they have made.

Thank you for your consideration and for raising this critically important bill.